Wednesday, April 11, 2012

"Natural Gas Settles Below $2" EIA Reports Inventory Tomorrow

I've seen estimates for injections into inventory ranging from 12 to 41 BCF. Anything under the 25 BCF quoted here would probably trigger the knee-jerk mentioned in this morning's "As Natural Gas Trades at $2.00 Beware a Whiplash Upmove".
$1.9800 last, in electronic AH.
From the Wall Street Journal:Natural Gas Settles Below $2

Natural-gas prices settled below $2 a million British thermal units
for the first time since January 2002, crossing the milestone after weak
demand and robust production have driven prices down 52% in the past
year.

Natural gas for May delivery gas on the New York Mercantile Exchange
hovered above the $2 mark for much of the day, piercing the level in the
last hour of trading and setting fresh lows into the settlement. The
front-month contract fell 4.7 cents, or 2.3%, at $1.984 a million
British thermal units.

Gas traders, analysts and other market watchers have been
anticipating the decline to these levels for months as record U.S.
inventory levels have signaled that supplies of the fuel are plentiful.
Mild winter weather and the warmest March on record only exacerbated the
oversupply situation. Now, as warmer spring temperatures arrive, some
investors worry that supplies will overtake available storage, sending
prices even lower.

"There's no reason we can't plumb even lower," said Stephen Schork,
an analyst at the Schork Group. "$1.50 isn't out of the realm at this
point."

Front-month gas futures ended at the lowest level for this date since
1997, and traders said expected further gains in bloated supplies could
slash prices by a further 10% to 30%, or as low as $1.50/mmBtu, where
prices haven't settled since August 1995.

U.S. gas storage data due out Thursday from the Energy Information
Administration are expected to show supplies rose by 25.5 billion cubic
feet last week, larger than the five-year average for the week,
according to analysts surveyed by Dow Jones Newswires.

A build of that size would put inventory at a record 2.505 trillion
cubic feet for this time of year. Stocks would grow to 59.8% above the
five-year average and 56.6% above the year-ago level.

"Supply is slaughtering the bulls, still, but what really happens
when we make a move below $2?," Pax Saunders, an analyst at Gelber &
Associates said a research note before prices fell below the milestone.
Much will depend on EIA inventory data, but Mr. Saunders sees potential
for a further 10% decline to around $1.797/mmBtu. Prices last settled
in that neighborhood in March 1999.

Still, Mr. Saunders said the drop below $2 in futures prices "is
absolutely meaningless. It's a psychological spot at the front of the
curve.

"We might see some panic" if calendar 2013 futures prices—ranging
from around $3.30 to $3.80/mmBtu—drop below $3/mmBtu, Saunders said.
"Until then, why would folks stop drilling. Crude is high" and has been
subsidizing output from wells that produce both crude and natural gas,
he said....MORE